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Hedge funds and other money managers continued to accumulate bullish positions in crude oil and its products last week but almost all buying remains concentrated in WTI, with little evidence of optimism in other futures contracts.

Portfolio managers purchased the equivalent of 30 million barrels in the six most important futures and options contracts in the week to May 19, exchange and regulatory data shows.

Fund managers have been net buyers in seven out of the past eight weeks, increasing their position by 292 million barrels since March 24.

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But last week’s purchases were again concentrated in NYMEX and ICE WTI (+23 million barrels), with little change in Brent (+2 million), U.S. gasoline (-1 million), U.S. heating oil (+3 million) and European gasoil (+2 million).

WTI purchases totalling 216 million barrels have accounted for almost three quarters of all buying in the six major contracts since March 24.

As a result, funds now hold a net position of 380 million barrels in NYMEX and ICE WTI, compared with only 158 million barrels in Brent.

After the lopsided buying, funds hold eight bullish long contracts for every short one in WTI, compared with ratios of only 2:1 in Brent, 3:1 in gasoline, 0.7:1 in heating oil and 1.3:1 in gasoil.

WTI FOCUS

The reasons for this concentrated buying in WTI are not entirely clear, though there are several possibilities, which are not mutually exclusive.

Production cuts by OPEC+ should help to reduce excess crude inventories upstream before drawing down surplus stocks of refined fuels downstream later, though there has so far been little benefit in Brent.

U.S. shale producers are cutting output hard, with the number of rigs drilling for oil falling to an 11-year low, which could help to deplete excess inventories in the United States faster than in other parts of the world.

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Some smaller hedge funds and other customers are still barred from initiating new positions in WTI by their brokers and clearing firms after excessive volatility around contract expiry last month.

Prohibition on initiating new contracts in WTI should hit long and short positions equally, though in practice it may be preventing some tactical short-selling as WTI prices climb.

Whatever the reason, NYMEX WTI short positions have fallen to only 44 million barrels, down from 108 million at the end of March and the lowest since the start of January.

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